June 2014 ISM Reports

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The Institute for Supply Management’s (ISM) monthly opinion survey showed that expansion of economic activity in the U.S. manufacturing sector slowed slightly in June. The PMI registered 55.3 percent, a decrease of 0.1 percentage point from May's 55.4 percent (50 percent is the breakpoint between contraction and expansion). ISM’s manufacturing survey represents under 10 percent of U.S. employment and about 20 percent of the overall economy. Jumps in the new-orders and imports sub-indices were the main sources of support for the expansion. 

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Wood Products and Paper Products expanded in June -- although in the case of Wood Products, the only contribution came from new orders. Paper Products exhibited much greater support among the sub-indices. “Orders are picking up, but pricing has declined in last month," wrote one Wood Products respondent. “Not the norm for this time of year.”

The pace of expansion in the non-manufacturing sector, which accounts for 80 percent of the economy and 90 percent of employment, also edged down in June. The NMI registered 56.0 percent, 0.3 percentage point lower than May’s 56.3 percent. Two sub-indices in the NMI – the Business Activity Index (“Overall activity” in the table below) and the New Orders Index – have good correlations to the economy; both expanded in June.

“Respondents’ comments vary by industry and company,” said Anthony Nieves, chair of ISM’s Non-Manufacturing Business Survey Committee; “however, the majority indicate that steady economic growth is continuing.” 

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All three of the individual service industries we track expanded in June; moreover, all of the respective sub-indices were either unchanged or increased. One Construction respondent indicated the “industry is extremely strong [and] business conditions look positive going forward.”

Commodities up in price included gasoline and diesel, lumber, paper, and natural gas. No relevant commodities were down in price. Wood pallets were once again in short supply.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.